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Senvion, Nordex see trend toward larger turbines as opportunity in US

Bigger and more efficient turbines will be essential for Senvion S.A. and Nordex SE to build their share in the expanding U.S. market, according to executives from the two German wind turbine makers. And targeting the U.S. market will be vital to their growth as the offshore wind market begins to take off and the last few years of the federal production tax credit fuel a rush to complete projects.

Senvion is expanding its presence the North American market with two 4.2 MW turbines, said CEO Jürgen M. Geissinger on the company's May 15 earnings call. Nordex CEO Jose Luis Blanco Diéguez, speaking on his company's May 15 earnings call, said that larger onshore turbines in the 3 to 4 MW range are among the company's best-selling products in U.S. market and that he expects installations of those turbines will increase in the U.S. in 2018.

U.S. installations will likely accelerate in the second half of 2018 as wind developers look to complete projects before the production tax credit, or PTC, decreases in value by another 20%. The PTC-driven boom has created opportunities for turbine makers, but companies are preparing for a decline in orders after the PTC phases out in 2020. Congress extended the PTC in 2015 to cover wind projects launched before Jan. 1, 2020. The tax credit steps down in value by 20% each year from 2016 to 2019 before ending in 2020.

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GE Renewable Energy is one of a handful of companies pouring money into developing larger offshore wind turbines.
Source: General Electric


The credit has created a major boom in wind installations; forecasters said capacity additions will most likely peak in 2020 at between 10,000 MW and 13,000 MW in annual installations, before dropping by nearly half afterwards.

"The U.S. is in full swing in the PTC cycle," Patxi Landa, Nordex's chief sales officer, said during the earnings call. He anticipates some PTC-qualifying projects from 2018 will spill over into the next three years, softening the end of PTC. "It's going to be still a very good year, but potentially slightly less than what we anticipated some time ago."

10 MW and up

As the number of new land-based projects begins to slow, turbine makers are gearing up for the emergence of the offshore U.S. wind sector. The U.S. is on track to add about 7,000 MW in offshore wind capacity by 2030, according to data from S&P Global Market Intelligence. That is driving turbine manufacturers to develop bigger and more efficient machines. Senvion, for example, is developing offshore turbines of 10 MW and above, working with 14 supply chain companies including ABB Ltd. and EnBW Energie Baden-Württemberg AG. According to a May 7 announcement, Senvion will spend the next few years working on the research and development project with funding from the European Commission. A prototype could be in operation by 2021.

"That's a very important project for us," Geissinger said on the earnings call.

Potential customers include developers in the U.S. In addition to projects already announced, the U.S. Bureau of Ocean Energy Management is currently considering adding more leases for development in the Atlantic Ocean, meaning more potential projects that could require turbines. The opportunities for offshore wind in the U.S. are particularly exciting because "the age of the big turbine is finally here," GE Renewable Energy chief technology officer Danielle Merfeld said in a May 9 presentation at the American Wind Energy Association's annual conference in Chicago. GE Renewable Energy is spending $400 million to develop a 12-MW offshore wind turbine that will rank among the largest in the world. Larger blades and taller towers will be part of the formula to bringing down the costs of offshore wind projects, especially in the U.S., Merfeld said.

"When you have bigger turbines, you're going to have fewer foundations, you're going to have more efficient cabling and installation operations," she said. "It doesn't really add much at-sea time whether you're going to maintain and service a large turbine or a small turbine ... big turbines drive down costs the best."